Shahid Karim, J. This judgment will also decide connected petitions W.P No.17982 of 2015, W.P No.21339 of 2016, W.P No.81 19 of 2016, W.P No.81 15 of 2016, W.P No.29142 of 2016, W.P No.27152 of 2016, W.P No.61835 of 2017, W.P No.101788 of 2017, W.P No.59935 of 2017, W.P No.126012 of 2017, W.P No.177571 of 2018, W.P No.215284 of 2018, W.P No.156477 of 2018, W.P No.22498 of 2019, W.P No.21542 of 2019 and W.P No.76744 of 2019. Although separate notices have been issued to the petitioner in these constitutional petitions, yet there is a commonality of challenge to SRO 115(I)/2015 ("SRO 115") issued by the FBR on 09.02.2015. By the notification certain powers and functions have been conferred on the officers of Directorate General (Intelligence & Investigation Inland Revenue) [D.G (I&I)] by section 230 of the Income Tax Ordinance, 2001 (Ordinance, 2001) .
The recital of the impugned notification provides that: "S.R.O 115(I)/2015.- In exercise of the powers conferred by section 230 of the Income Tax Ordinance, 2001 (XLIX of 2001), read with section 208 and sub-section (I) of section 209 the Federal Board of Revenue is pleased to confer upon the officers of the Directorate General (Intelligence and Investigatio n), Inland Revenue specified in column (2) of the Table below , the powers of the authorities specified in column (3) of the said Table, to exercise powers and perform functions under the provisions of the said Ordinance as specified in column (4) thereof, and having jurisdiction as specified in column (5) of that T able."
2. The petitioners' challenge is primarily founded on the holding of this Court in F.M. Textile Mils and others v.
Federal Board of Revenue and others (2017 PTD 1875 ). Under similar circumstances, SRO 116(I)/2015 (SRO 116) issued on the same date (in respect of conferment of powers under Sales Tax Act, 1990) was struck down by this Court on various grounds. According to Barrister Muhammad Umer Riaz, learn ed counsel for the D.G (I&I) (in some of the petitions), there is a clear distinction between the two, in that, the tenor of the two notifications is distinct from each other . He contends that SRO 116 was struck down on the ground that reappointment of the officers as officers of Inland Revenue could not be made through the impugned notification which was not the case in SRO 115. However , this argument cannot prosper since this was one of the aspects dealt with by this Court in dealing with SRO 116 whereas the other more pertinent grounds on which SRO 116 was struck down related to the functions of D.G (I&I) and the effect of SRO 116 in setting up a parallel agency to undertake the exercise of powers which were already conferred on Officers of Inland Revenue ("OIR") and which had an unsavory effect of exercise of powers by different agencies without creating a proper structure under which the D.G (I&I) was to function. In this respect, the following observations in the precedent would suffice to bring home the similarity in the two challenges: "23. What is the purpose of Section 30E and the power that comes to reside in the hands of FBR? That purpose can only be gleaned by the use of purposive interpretation which is sometimes referred as the antonym of textualism. According to Aharon Barak, Justices of the United States Supreme Court are divided on the task of constitutional interpretation, and it is his view "that purposive interpretation provides a proper solution to this interpretative dilemma". (See his Foreword to Harvard Law Review 2002). According to Aharon Barak, "one should not give the constitution a meaning that its express or implied language cannot sustain...A constitution is a unique legal document. It enshrines a special kind of norm and stands at the top of the normative pyramid......The key question is what is the proper system of interpretation in the context of a particula r system of government, in the context of a particular society"? In his view, "purposive interpretation is that proper system. Purposive interpretation is based, of course, on the concept of purpose. Purpose is a normative concept that the law constructs".
24. As was said by Lord Griffith in the famous case of Pepper v Hart, (1993) 1 A11 ER 42, 50, (quoted in Gadoon Textile Mills v W APDA 1997 SCMR 641 , 829): "The days have long passed when the courts adopted a strict constructionist view of interpretation which required them to adopt the literal meaning of the language. The courts now adopt a purposi ve approach to give effect to the true purpose of legislation".
25. Statutes should, said Lord Roskill in Anderson v Ryan, (1985) 2 A11 ER 355, 359, "be given what has become known as a purposive construction, that is to say, the courts should when possible identify the mischief which existed before the passing of the statute and then if more than one construction is possible favour that which will eliminate the mischief so identified".
29. In order to lend actuality to the analysis, it would be interesting to refer to some of the powers and functions conferred by SRO 116 and by way of illustration and exposition of the nature of those powers and the contradictions inherent therein, a reference to the powers conferred on Director General I & I (Inland Revenue) listed at serial No.1 of SRO 116 may be alluded to. By column 3, the powers of Chief Commissioner (Inland Revenue) have been conferred to be exercised by the Director General I & I (Inland Revenue). Column 4 in the Table given in SRO 116 delineates the powers and functions so conferred. The first power is that under section 21(4) which, for facility , is reproduced as follows:- "(4) Notwithstanding anything contained in this Act, where the Board, the concerned Commissioner or any officer authorized by the Board in this behalf has reasons to believe that a registered person is engaged in issuing fake or flying invoices, claiming fraudulent input tax or refunds, does not physically exist or conduct actual business, or is committing any other fraudulent activity , the Board, concerned Commissioner or such Officer may after recording reasons in writing, block the refunds or input tax adjustments of such person and direct the concerned Commissioner having jurisdiction for further investigation and appropriate legal action."
30. The entire section 21 relates to de-registration, blacklisting and suspension of registration of a registered person or such class of registered persons not required to be registered under the Act. The procedure for blacklisting such persons or suspension of the registration has to be in accordance with the procedure prescribed by the FBR. The enormous power given in sub-section (4) is conferred on the Board, the concerned Commissioner or any officer authorized by the Board in this behalf who may, in case there are reasons to believe that a registered persons is engaged in issuing fake or flying invoices, claiming fraudulent input tax or refunds etc., the Board, the concerned Commissioner or such officer may after recording reasons in writing, block the refunds or input tax adjustment of such person and direct the concerned Commissioner having jurisdiction for further investigation and appropriate legal action. Therefore, primarily the jurisdiction for blocking the refunds or input tax adjustment is conferred on the Board, the concerned Commissioner or such officer as authorized by the Board. It can be argued that the Director General I & I is included in the category of an officer authorized by the Board and SRO 116, in fact, does confer such a power . However , it is anomalous indeed that that officer should direct the concerned Commissioner for further investigation and appropriate legal action. The jurisdiction has been vested in the Commissioner having jurisdiction for further investigation and appropriate legal action by the legislature and the same powers cannot be conferred by the FBR through a notification and particularly when, as held above, that officer is an officer below the rank of a Commissioner Inland Revenue and cannot, therefore, direct the concerned Commissioner for further investigation and appropriate legal action. It is otiose to confer such a power in the first place as the power has validly been conferred on the concerned Commissioner and upon further investigation, the concerned Commissioner can very well refer the matter to the D.G (I & I) for proceeding under the relevant provision in case a tax fraud has been committed or the registered person is committing a fraudulent activity . Such a power cannot be conferred through SRO 116 on an officer of D.G (I & I). Also for the additional reason that the power under Section 21(4) is to be exercised by either the Board, the concerned Commissioner or any officer authorized by the Board and is not a power peculiar to be exercised by the Chief Commissioner (Inland Revenue) and thus for this reason also such a power cannot be conferred on an officer of D.G (I & I). Yet the conundrum gets more complicated if we were to consider the precise nature of the powers conferred under Section 21(4). For, the said provision deals with a panoply of powers. The first of these is conferred on the Board, the concerned Commissioner or an officer authorized by the Board, "to block the refunds or input tax adjustments of such person" . The second power is exercised by the "concerned Commissioner having jurisdiction" for further investigation and appropriate legal action. These are distinct powers invested in distinct officers and SRO 116 fails to clarify which of the powers mentioned in section 21(4) have been prescribed to be conferred by it. The lack of specify will be a recipe for abuse of discretion.
32. The provision relates to access to record and documents and obliges a perso n who is required to maintain a document under the Act as and when required by the Commissioner to produce that record or documents which are in his possession or control. By sub-s ection (2), the officer of Inland Revenue authorized by the Commissioner on the basis of the record obtained under sub-section (1) may, once in a year, conduct audit. Thus at first blush, the power conferred by section 25 is, in essence, the power to conduct audit. It is a specialized and skilled assignment which cannot be undertaken by the Director General I & I or any other officer of D.G (I & I). Be that as it may, the provisions of sub-sections (1) and (2) read cumulatively merely confer a power to conduct audit and no more. The entire reliance of the learned counsel for the respondents as also the Deputy Attorney General was on the proviso to sub-section (2) which deals with the matters of tax fraud. The proviso comes into play when the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, the Commissioner may authorize an officer of Inland Revenue to conduct an inquiry or investigation under Section
38. This is the scheme of the law when a tax fraud is detected. The learned counsel for the respondents as also the learned D.A.G invited this Court to read the proviso independently without reference to sub-sections (1) and (2).
This contention should receive a short shrift as the proviso on the basis of establis hed rule is merely an exception to the main provision of which it is a part and has to be read in conjunction with the part of the Act to which the proviso has been made. However , I have no doubt that the proviso will be triggere d only upon the conduct of audit by the officer of Inland Revenue authorized by the Commissioner and cannot be set in motion without such audit having been conducted and to precede any action under the proviso. It is the information or sufficient evidence based on the audit which could form the basis of an action in terms of the proviso and on the basis of which the Commissioner can conclude that a tax fraud has, in fact, been committed and so an inquiry or investigation under Section 38 is in order . This was the finding rendered by this Court in W.P No.24062 of 2016 and the following observations are relevant for our purposes:- "13. The category of persons who may be required for any inquiry or investigation in a tax fraud committed by him as mentioned in section 38 is a category which is not free from doubt. The case of this category of persons is relatable to the provisions of section 25 of the Act, 1990. As adumbrated, the Commissioner may direct an investigation or inquiry to be held upon sufficient evidence showing that a registered person is involved in tax fraud or evasion of tax. This is the only provision perhaps in the Act, 1990 which relates to the involvement of a registered person in a tax fraud or evasion of tax. Such an opinion can be formed by the Commissioner upon the coming in his hands of any record or documents maintained by a registered person . Upon the formation of such an opinion the Commissioner may direct an inquiry or investigation under section 38 to be held. This is precisely the inquiry and investigation contemplated by section 38 while referring to it as one of the categories of persons in respect of whom a notice under section 38 may be served. Therefore, this is the only instance where the provisions of section 38 have a close nexus with the provisions of section 25 and both these provisions are to be read inextricably . In all other cases of categories of persons, section 38 is an independent self-executing provision and can be set in motion without recourse to section 25 of the Act, 1990. By way of elaboration, it may be stated that in case there are allegations of tax fraud or evasion of tax, the provisions of section 38 cannot be invoked unless an opinion has been formed under section 25 by the Commissioner concerned."
33. Thus, the argument of the learned counsel for the respondents is indefensible that, in fact, SRO 116 confers the powers of the proviso to sub-section (2) of section 25 relating to tax fraud. In any case, SRO 116 confers the powers both under sub-sections (1) and (2) of section 25 and this fact alone should be sufficient to put paid to those arguments. Under no circumstances can the FBR by the terms of SRO 116 confer powers of audit on the officers of D.G (I & I) in complete disregard of the specialized nature of the job of conducting an audit. It is also not the case of FBR that the officers who have been conferred these powers are skille d in the functions of carrying an audit. It can be seen that the legislature was careful in providing that the Commissioner can only require a person to produce record or documents which are in his possession or control and the conduct of audit will be done by an officer of Inland Revenue who is authorized by the Commissioner and this presupposes that that officer of Inland Revenue will be a skilled officer having the expertise and academic qualifications to carry out audit of records and documents. It could be reasonable to presume that such a power may be conferred on an officer of directorate general Internal Audit but by no stretch of imagination can the D.G (I & I) be given that power in complete oblivion of the specialized nature of these directorates. Thus, it clearly follows that the conferment of powers under Section 25 on the Director General I & I (Inland Revenue) is incompetent and without any rational basis.
40. The remainder of the powers and functions conferred through SRO 116 seem to have a relation to the nature of the D.G (I & I) and does not require any discussion other than to bring home the proposition that indeed only those powers can be conferred on the officers of D.G (I & I) which have a close nexus to the nature and character of the said Directorate General and it is improper and irrational to confer powers which have no connection with the working and functionality of the D.G (I & I). SRO 116 to the extent of conferring of those powers and functions is ultra vires and without lawful authority .
3. It is apparent from the above that the same vices afflict SRO 115 as well, in that, by the said notification various officers of D.G (I&I) have been conferred powers of the Chief Commissioners and Commissioners which they are equipped to undertake and which are within their expertise. There is no reasonable and rational basis for the said powers and functions to be conferred on these officers. The entire basis of FM Textiles is applicable on all fours to the circumstances in the instant cases. There is no reason to hold otherwise and to take a different view from the one taken in FM T extiles by this Court.
4. The learned counsel for the respondents relied upon the validation clause inserted by section 241 of the Ordinance, 2001 by the Finance Act, 2018 which provides that: "241 (2) Notwithstanding any omission, irregularity or deficiency in the establishment or conferment of powers and functions, of the Directorate-General (Intelligence and Investigation), Inland Revenue and authorities specified in section 230, all orders passed, notices issued and actions taken in exercise or purported exercise of the powers and functions of the Commissioner under this Ordinance by the Directorate-General (Intelligence and Investigation), Inland Revenue or the authorities specified in section 230 shall be deemed to have been validity passed, issued and taken under this Ordinance."
5. On the basis of sub-section (2) added in section 241 of the Ordinance, 2001 it was argued by the learned counsel for the respondents that the acts taken by the respondents in respect of the petitioners stand validated with the insertion of sub-section (2) Finance Act, 2018 and have been saved from any challenge whatsoever . However , the validation will not impact any determination made by this Court on the basis of the challenge raised by the petitioners to SRO 115. According to the learned counsel for the respondents, even if SRO 115 was struck down by this Court being ultra vires and non est, the proceedings taken and the notices issued can still be pursued by the officers of D.G (I&I). This argument is a contradiction in terms as the striking down of SRO 115 by this Court will necessarily entail the consequent striking down of the notices issued to the petitioners and no amount of validation could confer validity to these notices on a standing basis. Be that as it may, the validation does not have the effect of giving legal cover to the actions of D.G (I&I) as the validation clause mere ly validates any irregularity or deficiency in the establishment or confer ment of powers and functions by D.G (I&I). On the contrary , this Court does not merely render a finding with regard to the irregularity in the establishment of D.G (I&I). That is one aspect of the matter . SRO 115 has been found deficient on a number of interwoven principles ranging from constitutional (due powers of law) to rule of law sources. It is also contradictory on the part of the learned counsel for the respondents to argue that the striking down of SRO 115 will result in compelling the Federal Board of Revenue
(FBR) to issue a new notification as fresh action could not be initiated in a vacuum. The validation clause merely saves the pending action but in case SRO 115 is struck down there will have to be conferred anew a legally valid set of powers (emanating from a lawful source) to enable the Officers of D.G (I&I) to continue to exercise their powers.
6. Barrister Muhammad Umer Riaz has placed on record a notification SRO 1301(I)/2018 (SRO 1301) issued by FBR to specify the functions, powers and jurisdiction of D.G (I&I) and its officers under the Sales Tax Act, 1990.
This has been done perhaps to give effect to the judgment in FM Textiles, for SRO 1301 supersedes SRO 116, too.
This was preceded by the substitution of section 30A by the Finance Act, 2018. After substitution, section 30A provides that: "30A. Directorate General (Intelligence and Investigation), Inland Revenue.-- (1) The Directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint.
(2) The Board may , by notification in the official Gazette,--
(a) specify the functions and jurisdiction of the Directorate General and its officers; and
(b) confer the powers of authorities specified in section 30 upon the Directorate General and its officers."
Whereas the original section 30A read as under: ""30A. Directorate General (Intelligence and Investigation), Inland Revenue.-- The Directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint."
7. Section 30A (as substituted) is in pari materia with section 230 of the Ordinance, 2001 and by its sub-section (2) requires FBR to perform two distinct functions while issuing a notification. One, to specify the functions and jurisdiction of the D.G and its Officers and second, to confer powers of authorities specified in section 30 upon Officers of D.G (I&I). (Section 230 of the Ordinance is similarly worded and the significance of these distinct roles shall be adverted to in the later part of this judgment). A similar notification has not been issued under the provisions of Ordinance, 2001. However , essence of the matter is that the periphery of powers of D.G (I&I) has not been defined in either the law itself or in any statutory rules framed under the Ordinance, 2001. It has left the Officers of D.G (I&I) to be completely adrift without defining their powers and setting out the limits within which the Directorate may operate. This raises a seminal question regarding jurisdiction of the Directorate to proceed in cases coming up before it. For, there is no doubt that the officers of Inland Reven ue have discretionary powers in all matters envisaged by law itself and a clear purpose must be spelt out in setting up of a Directorate General of Investigation & Intelligence with regard to the overlapping field of activity within which the Directorate and its officers will operate. Certainly , it does not make sense to confer the powers of Commissioners and Chief Commissioners and other officers of Inland Revenue on the officers of Directorate as that would be tantamount to setting up a parallel hierarchy of officers to exercise the same powers already conferred upon a regular cadre of officers of Inland Revenue. Moreover , the learned counsel for the respondents could not rebut the proposition that the officers of D.G (I&I) cannot proceed further after a certain stage. For example, notice has been issued to one of the petitioners under Section 177 which relates to audit proceedings. After a certain stage in the proceedings, it is inconceivable as to how the officer of D.G (I&I) who has issued the notice will proceed further for, there are consequential steps to be taken pursuant to the issuance of the notice and which must then be concluded by taking further logical steps. But the underlying concern is that no rules have been enact ed to regulate and structure the powers of officers of D.G (I&I) to disting uish them from the other officers of Inland Revenue. This makes their powers unregulated and is a reasonable ground for holding that any powers exercised by the officers of D.G (I&I) are based on whims and unstructured discretion which cannot be countenanced and is an af front to the rule of law .
Rule of Law:
8. Concentrated, unguided power runs counter to the concept of democracy , constitution and rule of law. Conferring broad-based and unstructured power on officers of an agency is anathema to the quality requirement of rule of law.
There has to be a remit and periphery within which these officers are to function. The precise scope and the nature of their powers has to be delineated so that they do not run amok and threaten the very fiber of commerce and trade which in turn, impacts the dynamics of the national economy . The officers seem to have been conferred absolute power to initiate action at their whims and to choose to exercise powers at their discretion without the corresponding essential prerequisites set out by statutory rules. This means that the officers may simply lurk around covertly and suddenly strike one day. For, in the absence of rules to specify the circumstances under which their powers are triggered, the exercise of powers will be whimsical and inherently invidious. It is not improbable that in most cases the proceedings may not be commenced with the best of motive s and intention and may well be fear and intimidation orchestrated. Even a judge is constricted by rules and embarks upon some proceedings by a formal application. Why should the Officers of DG I&I be given a carte blanche to breach the rights of assesses under a cloak of secrecy . This assumes significance in view of the fact that the notification does not confer any new powers on these officers but gives powers already conferred by law on other officers of Inland Revenue. Thus a parallel system has been established without laying out the distinguishing features to separate the directorate from the regular hierarchy of officers as well as the special circumstances under which the officers of directorate, to the exclusion of officers of Inland Revenue, will operate to exercise these powers. But this too is presumptuous! Both the officers, viz. Officers of the directorate and the Officer of Inland Revenue, may, simultaneously , set proceedings in motion in respect of the same assess ee and under the same provisions of law. There are no rules to prohibit either of them from proceeding or to deal with this unsavory situation. It will bear repetition that the officers of Directorate I & I do not exercise any distinct and separate powers peculiar to this office and delineated as a separate set of powers. They have only been conferred powers already vesting in the Officers of Inland Revenue.
This begs the question: What was the need for the conferment of the same powers on a parallel hierarchy of officers and what were the factors to determine when and how one class of officers, to the exclusion of other class of officers, was to initiate action? Are the officers of Inland Revenue unsuited to exercise the powers vested in them by law and so a new cadre of officers was created to exercise them, perhaps in the hope that these officers, by dint of a dif ferent designation, will have more teeth to show when they growl.
9. But this begs the further question! Will the provision of law under which powers are exercised by officer of Directorate I & I assume more clout or potency in their hands when squared with the officers of Inland Revenue?
The answer , doubtless, is in the negative. Surely , these powers, be it in the hands of Commissioner Inland Revenue or Director I & I will mean the same and will have the exact same sweep. And in most case, the exercise of a power under the statute will lead into a blind alley (in the case of an officer of Directorate I & I). It is difficult to grasp how the action will conclude in the hands of that officer for there are no clear rules to monitor the situation or to lay guidance for the officer of Directorate I & I to stay his hands and the officer of Inland Revenue to take over (for example, for conduct of audit). But the most telling aspect, in my opinion, is the absence of the legally manageable standards to guide the officer of Directorate I & I to take cognizance of a matter and to assume jurisdiction. The concept is of amorphous nature. There has to be a statutory regime underpinning the whole array of powers of these officers so as to dispel any spectre of abuse. It is against the grain of the core principles to leave the officers without any structure to constrain and compel them to act compatibly with properly defined rules. It is one of the motifs of a liberal democracy and a fundamental concept of rule of law that all powers are structured and defined by rules. The rule of law and the due process of law are the twin concepts which constitute the structural foundation of any constitutional democracy . They play a central role in developing the constitutional right of a person to make full answer and defence. It is stated in Article 16 of the 1789 French Declaration of the Rights of Man and Citizen that: "A society in which the observance of the law is not assured, nor the separation of powers defined, has no constitution at all."
It is also said that 'arbitrary uncontrolled discretion is likely to run riot at the expense of clear discernable principle'.
10. Rule of law is concerned with the balance between the establishment of order and the control of governmental power . (C.H. McIlwain, Constitutionalism and the Changing World (Cambridge: Cambridge University Press, 1969) at 82). The concept is essentially aimed at the organization of society and the limitation of governmental powers through law . The rule of law presupposes that governmental power can be exercised and controlled through law .
11. The officers of Directorate I & I have, it seems, absolute discretion to proceed in a certain matters. This runs counter to what Justice Douglas remarked in U.S v W underlich, 342 U.S 98 : "Law has reached its finest moment when it has freed man from the unlimited discretion of some ruler...when discretion is absolute, man has always suffered."
12. It was said in the Concept of the Rule of Law and the European Court of Human Rights by Geranne Lautenbach that: "The rule of law is also directed at the government, and demands that the govern ment can only rule according to law. This more comprehensive aim corresponds with the two core elements of the rule of law: the control of power , by law .
"Secondly the rule of law is aimed at the protection of the individual from arbitrary power . It is based on a view of society centered on the individual. As such, the rule of law is part of a liberal ideology ."
13. The above statement was distilled from leading authorities and writings on the subject and animates the jurisprudence of almost all developed countries.
The above treatise further refers to legality as the central element of the rule of law concept (at p.37) and requires law to conform to certain quality requirements. By reference to the seminal work of Lon L. Fuller , the Morality of Law (New Haven / London: Yale University Press, 1969) at 46-91, legality as a concept that sets quality requirements to law was elaborated: "Fuller has given an elaborate and sophisticated account of legality as a concept that sets quality requirements to law. Fuller tells the parable of King Rex, who fails to set up a legal system for his kingdom in eight different ways, which correspond to a set of eight require ments which must be fulfilled for law to exist. These requirements are the requirements of legality . According to Fuller , a failure to comply with these requirements results in no legal system existing at all. The eight requirements of legality are the following: laws must be general, laws must be promulgated, laws should not be retroactive, laws should be clear , laws should not contradict, laws should not require the impossible, laws should be relatively constant over time and there must be congruence between official action and the declared rules. A short description of these eight elements of legality will be given here:
1. Generality essentially requires that there are rules. Law must be more than patternless exercise of political power .
2. Promulgation requires that laws are published so that they can be known by the public.
3. Retroactive laws are not allowed, as such laws cannot function as a guide to people' s behaviour . Still, exceptions are sometimes allowed to cure irregularities of form, and courts may also sometimes issue a judgment interpreting a law which could lead to retroactive application of their interpretation of law .
4. Clarity of the law requires laws to be sufficiently precise, such that the required precision of the law depends on the existence of commonly accepted standards. General words, such as fairness, can have a definite meaning where a body of established practice exists.
5. The requirement that laws may not contradict simply entails that the legislature should endeavour not to include conflicting provisions within a single law or enact a law that negates the objects of (a provision of) another law .
6. Laws requiring the impossible are incompatible with legality , because one's conduct cannot be guided by such law. The main example is a strict form of liability which can assign responsibility for occurrences that lie beyond a persons' powers.
7. Stability of the law is important in a similar vein: it allows individuals to be guided by the law. When the law changes frequently it becomes more difficult to conform to the law .
8. There must be congruence between official acts and declared rules ; this last requirement entails that some form of control over government must be instituted. Normally this control function is taken up by the judiciary .
Consequently , a pressing question is how far the judiciary' s power extends in independently interpreting the law ."
14. The eight quality requirements set out above are the bedrock principles which illuminate the meaning and effect of the concept of rule of law. The first requirement of generality assumes that there are rules and that 'law must be more than patternless exercise of politica l power '. This, in my opinion, is at the centre of controversy involved in these petitions. There are no rules to guide and direct the officers of Directorate I & I. Since there are no rules, the other set of requirements, too, have gone abegging. Hence, there is no clarity of the law and no means of ascertaining congruence between official acts and declared rules. Tom Bingham (Law Lord of the United Kingdom) in his book, 'The Rule of Law', brought out the correlation between rule of law and official discretion in the following words: "The rule of law does not require that official or judicial decision-makers should be deprived of all discretion, but it does require that no discretion should be unconstrained so as to be potentially arbitrary . No discretion may be legally unfettered."
15. In the above book the author explore d eight ingredients of the rule of law one of which was that 'the law must be assessable and so far as possible intelligible, clear and predictable.'
He further remarked that: "The third reason is rather less obvious, but extremely compelling. It is that the successful conduct of trade, investment and business generally is promoted by a body of accessible legal rules governing commercial rights and obligations. No one would choose to do business perhaps involving large sums of money , in a country where the parties' rights and obligations were vague or undecided. This was a point recognized by Lord Mansfield, generally regarded as the father of English commercial law, around 250 years ago when he said: "The daily negotiations and property of merchants ought not to depend upon subtleties and niceties; but upon rules easily learned and easily retained, because they are the dictates of common sense, drawn from the truth of the case." In the same vein he said: "In all merchantile transactions the gretr object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other .
Because speculators (meaning investors and businessmen) then know what groun d to go upon." But this is not an Official Liquidator -fashioned and outdate d notion. Alan Greenspan, the former chairman of the Federal Reserve Bank of the United states, when recently asked, informally , what he conside red the single most important contributor to economic growth, gave as his considered answer: "The rule of law'. Even more recently , The Economist published an article which said: "The rule of law is usually thought of as a political or legal matter .... But in the past then years the rule of law has become important in economics too...The rule of law is held to be not only good in itself, because it embodies and encourages a just society , but also as a cause of other good things, notably growth.
"Given the importance of this principle, we cannot be surprised to find it clearly stated by courts all over the world.
In the House of Lords in 1975 Lord Diplock said: "The acceptance of the rule of law as a constitutional principle requires that a citizen, before committing himself to any course of action, should be able to know in advance what are the legal principles which flow from it." He made much the same point a few years later: 'Elementary justice or, to use the concept often cited by the European Court (the Court of Justice of the European Communities), the need for legal certainty demands that the rules by which the citizen is to be bound should be ascertainable by him (or, more realistically , by a competent lawyer advising him) by reference to identif iable sources that are publicly available."
16. The observations set out above by an eminent common Law Judge are closely tied in with the statements on the subject made by the Geranne Lautenbach which is based on a rich tapestry of case law by European Court of Human Rights and academic works of prominent scholars. It also emphasises the need for a body of accessible legal rules for the successful conduct of trade, investment and business generally . In short, it is universally accepted now that all official acts must conform to rules which are published and accessible. Since there is no intelligible criteria laid down by rules validly promulgated for the exercise of powers by officers of Directorate I & I, the cognizance of a case fails to meet the standards of legality and so is without lawful authority .
17. In Amanullah Khan v. Federal Government of Pakistan (PLD 1990 SC 1092 ), Shafiur Rehman J. eruditely iterated the seven instruments of structur ing discretion and the need for framing rules to regulate its exercise. The precedent was a paradigmatic and progressive decision enumerating the basic principles of rule of law in matters of official discretion. The learned Judge articulated the principles in the following words: "...Wherever wide-worded powers conferring discretion exist, there remains always the need to structure the discretion and it has been pointed out in the Administrative Law Text by Kenneth Culp Davis (page 94) that the structuring of discretion only means regularizing it, organizing it, producing order in it so that decision will achieve the high quality of justice. The seven instruments that are most useful in the struct uring of discretionary power are open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair informal procedure. Somehow , in our context, the wide worded conferment of discretionary powers or reservation of discretion, without framing rules to regulate its exercise, has been taken to be an enhancement of the power and it gives that impression in the first instance but where the authorities fail to rationalize it and regulate it by Rules, or Policy statements or precedents, the Courts have to intervene more often, than is necessary , apart from the exercise of such power appearing arbitrary and capricious at times."
18. Any exercise of powers without framing rules to regulate them has been descr ibed as arbitrary and capricious.
The above observations apply , a fortroi, to the facts of the present cases as the discretion vested in the officers of Directorate I & I has the potential to lead to dire and egregious consequences.
19. By way of illustration, let us examine the impugned notice in this petition (W.P No.4361 of 2017). It begins with these words: "During the course of investigation into the tax matters of M/s Tetra Pak Pakistan Ltd. it was observed that M/s Tetra Pak Pakistan Ltd. and you, Nestle Pakistan Ltd. conduct joint marketing/ promotion/ advertisement campaigns."
20. No reference to the investigation has been made nor has it been stated as to under what provision of law is the investigation being conducted. Clearly , the notice has been issued by Deputy Director, I & I, I.R, Lahore who has limited powers under SRO 115. No power of investigation has been conferred upon him. Thus the assumption of jurisdiction regarding a purported investigation is ultra vires and incompetent.
21. Under SRO 115, the officer had the power under Section 176 of Income Tax Ordinance, 2001 to issue notice.
The notice is for the purposes of obtainin g information or evidence. But to what avail and where does it lead to?
Nowhere, in my opinion. The officer (exercising powers of a Commissioner) can, at best, impound any accounts or documents so produced for examination or for the purposes of prosecution. But the officer seems to be oblivious of this aspect and the precise scope of section 176 and has embarked upon an enqu iry of some sort. This is evident from the last two lines of the notice which say: "You are hereby requested to explain the difference of Rs.615,243,545/- arising from the aforementioned observations by 18.01.2016."
22. Thus, there are two ways by which the officer is stepping outside his jurisdiction. There is a prior investigation which has no basis in law and secondly , an enquiry is being undertaken (after the information was submitted by the petitioner) and an explanation is being sought. This is outwith the authority of the of ficer issuing the notice.
23. The above illustration clearly shows that the officers are unaware of the periph ery of their powers and tend to move the goalposts at their whim and caprice. The primary reason is that there are no rules to set the limits to their powers and the discretion is unregulated.
24. In W.P No.27152 of 2016, the Director (IR), Intelligence and Investigation, LTU, Lahore, has issued a notice under Section 177 of the Ordinance, 2001, for audit of income tax affairs of the petitioner . There is no reasonable basis to hold that that officer has the qualification and the expertise to conduct audit and also no plausible explanation to divert the normal course of the Commissioner exercising that power (which originally vests in him) and for it to be exercised, instead, by an officer of Directorate I & I. It may be borne in mind that apart from the Commissioner who is presumed to be a specialist for conducting audit there has been established a Directorate General of Internal Audit (section 228) for this very purpose. It is certainly incredulous, therefore, for the FBR to confer the power to conduct audit on the officers of Directorate I & I as well without any rational basis or intelligible criteria. It merely depicts the utter lack of informed decision-making on the part of FBR.
25. In their effort to prevent agencies from using this broad authority (to make and to apply policy delegated by general, statutory language) Courts have developed certain 'Common Law' princ iples. "Agencies must articulate their reasons for reaching policy judgments. They must explain why they are applying those policies to particular individuals. They must apply those policie s similarly to similar individuals; and, when changing policies, they must take reasonable account of the individual expectations that their previous policies created.... We begin by considering the extent to which insistence for the creation of explicit agency rule and standards help to promote consistent and thus, fair, treatment of individuals . We do so to underscore two basic, and conflicting, notions of fairness in administrative law, as elsewhere in the law: (1) treating like persons alike, a principle that argues for 'rules', or for 'law';" (Administrative Law and Regulatory Policy , problems, text and cases, seventh ed. by Stephen G. Breyer , Richard B. Stewart, Cass R. Sunstein, Adrian V ermeule and Michael E. Herz).
26. On the doctrine to protect private parties against injustice on account of unnecessary and uncontrolled discretionary power , the following statement from Administrative Law Treatise, Vol.1 (2d ed.) by Kenneth Culp Davis reiterates the rule regarding meaningful statutory standards: "Instead of saying that delegations are unlawful or that delegations are unlawful unless accompanied by meaningful standards, the courts should affirmatively assert that delegations are lawful and desirable, as long as the broad legislative purpose is discernible and as long as protections against arbitrary power are provided. Courts should assert that congressional formulation and enactment of the content of the Code of Federal Regulations would mean worse government, not better government, because Congress is and should be geared to major policies and main outlines, and administrators are better qualified to legislate the relative details, often including even major policy determinations. The courts should recognize that administrative legislation through the superb rulemaking procedure that is rapidly developing usually provides better protection to priva te interests than congressional enactment of detail.
The change in the basic purpose is essen tial because the underlying problem is broader than control of delegation; the problem is to provide effective protection against administrative arbitrariness. Solving that problem requires protection not only against delegated power but also against undelegated power , especially the enormous undelegated power of selective and sometimes discriminatory enforcement, an undelegated power which is typically exercised without either statutory or administrative standards, without procedural safeguards prescribed by statutes or by administrative rules or by reviewing courts, and without judicial review ."
"The crucial consideration is not what the statute says but what the administrators do. The safeguards that count are the ones the administrators use, not the ones mentioned in the statute. The standards that matter are the ones that guide the administrative determination, not merely the ones stated by the legislative body . The test should accordingly be administrative safeguards and standards, not statutory safeguards and standards.
27. In summation, it was stated in the above treatise that: "When standards are lacking to guide the exercise of discretionary power in individual cases, courts should in appropriate circumstances require administrative rulemaking to provide the standards, the guides, the rules, the limits, and the procedures...."
28. Section 230 of the Ordinance, 2001 sets up the D.G (I&I). It casts two onerous responsibilities on FBR. SRO 115 merely fulfills the mandate of section 230(2)(b) (to confer powers) but the prior mandate has gone unfulfilled.
Section 230 provides that:-
230. Directorate General (Intelligence and Investigation), Inland Revenue.-- (1) The Directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board, may by notification in the official Gazette, appoint.
(2) The Board may , by notification in the official Gazette,--
(a) specify the functions and jurisdiction of the Directorate General and its officers; and
(b) confer the powers of authorities specified in section 207 upon the Directorate General and its officers."
29. Reading sub-section (2) holistically clearly shows that specifying functions and jurisdiction of Officers of D.G (I&I) is a prior step to the one conferring powers upon them. A proper construction of sub-section (2) ineluctably leads to the conclusion that there cannot be a conferment of powers without specifying functions and jurisdiction of the officers and this makes sense. Unless the officers are aware of their jurisdiction (and functions) they will not be able to employ these powers within the sphere of activity settled by law. Even more important than specifying the jurisdiction is the act of specifying the functions of D.G (I&I) for that will determine the precise nature of the reason for their existence and set out the details of the field of activity . Section 230 is a specimen of brevity and by sub- section (2), legislature has delegated on FBR the power of rule-making to provide for relative details and better protection to private interests, against administrative arbitrariness. But FBR cannot exercise that power of administrative legislation by patchwork ignoring the essence of the delegated authority which postulates a structural approach of firstly specifying the functions and thereafter for powers to be conferred. The use of the word 'and' after semi-colon at the end of clause (a) in sub-section (2) reinforces the view explicated above and leaves it in no manner of doubt that the notification regarding the functions and jurisdiction has to precede the notification conferring powers, and not the other wary round. On this ground, too, SRO 1 15 is ultra vires and must be set aside.
30. These petitions are allowed . SRO 115 and the impugned notices are set aside being without lawful authority and of no legal ef fect.
31. FBR is directed to initiate the process of specifying the functions and jurisdiction of the Officers of D.G (I&I) and to complete it within two months. Thereafter FBR may confer powers on officers of D.G (I&I) compatibly with their functions and to accord with the holding by this Court.